PDI-01 - The Insurance Institute of Ireland

PDI-01
THE NATURE
OF INSURANCE
KEY POINTS 2016
CHAPTER ONE: THE IRISH INSURANCE
MARKET – WHERE YOU WORK
A
The Irish insurance market
B
Insurance buyers
B1
Private individuals
B2
Commercial concerns
B3
Public bodies
During 2013, 441,214 new claims were notified to
Insurance Ireland members. Of these, 53% were motor
claims, while 23% were made on property policies.
Claims costs for that year amounted to €1,693 million.
Public bodies include local authorities and schools. Public
bodies may also purchase specific cover for specialised
classes of risk, such as professional indemnity insurance
relating to negligent professional advice or medical
malpractice.
A1cEmployment
B4
Associations and clubs
The insurance market involves four main groups:
•
•
•
•
Insurance buyers – those who purchase insurance products and services, i.e. customers
Insurance providers – those who sell or provide insurance, e.g. insurers and the State
Distribution channels – the means through which customers purchase insurance from insurers
Reinsurers – those who provide insurance for insurers, i.e. other insurance companies or specialist reinsurance companies.
A1a
These can be divided into four main groups:
1.
private individuals
2.
commercial concerns
3.
public bodies
4.
associations and clubs.
The main types of non-life insurance cover purchased
in Ireland by individuals are motor, household buildings
and contents, private health, travel, gadget, mobile phone,
caravan and pet insurance.
Premium income
Motor insurance is the largest type of non-life insurance
making up 43% of all non-life business (€1,113 million in
gross premiums in 2013). Property is the second-largest
class making up 33% of all non-life business (€838
million in gross premiums) in 2013 with net written
premiums of €2,149 million.
A broad category that can include a large multinational
corporations, self-employed sole traders, partnerships
and charitable organisations.
A1bClaims
According to PwC’s 2014 report, approximately 27,000
people were employed in the insurance sector in Ireland.
Fourteen thousand were employed directly by insurance
companies and an additional 13,000 were employed
by companies directly related to the industry such as
insurance broking, loss adjusting, loss assessing, actuarial
consultancy, risk management, captive management and
outsource services providers.
This means that in 2014, 1 in every 4 working in financial
services in Ireland was employed directly or indirectly by
the insurance industry.
Associations and clubs can come together in affinity
groups (e.g. the Irish Farmers Association or trade unions)
and approach insurance companies to provide group
discounts / scheme arrangements for their members.
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CInsurers
Any company selling insurance in Ireland must be
authorised by the Central Bank and must meet the
conditions in the Insurance Acts and Regulations
1909–2000.
Many captive companies operate from the International
Financial Services Centre (IFSC) in Dublin or similar
operations in the Channel Islands, Bermuda and the
Isle of Man – all territories that provide a favourable tax
regime.
Different types of Insurers are:
C4
1.
2.
3.
specialist insurance companies
composite insurance companies
captive insurance companies
The State, although not an ‘insurer’ in the usual sense
of the word, also provides insurance for itself and other
bodies and organisations in certain circumstances.
C1
Specialist insurance companies
C2
Composite insurance companies
Specialist insurers must be authorised by the Central
Bank to sell specific types of insurance, e.g. DAS – for
legal protection insurance and breakdown assistance
cover.
Most insurers in the Irish general insurance market
are composite insurers. The range of business they
accept usually includes:
•
accident and health
•
motor vehicle
•
marine, aviation and transit
•
fire and other damage
•liability
•credit.
The State
The State acts as an insurer in situations where the
insurance market is unable or unwilling to provide cover,
e.g. war and terrorism risks, and export credit guarantee
insurance.
The State also acts as its own insurer for many of its
risks, e.g., the State self-insures the motor risk of certain
State vehicles. The State Claims Agency (SCA) will deal
with claims arising from use of those State vehicles.
There are different authorities that deal with other State
motor claims. For example, Córas Iompair Éireann (CIÉ)
and the Rail Procurement Agency (RPA) are deemed to
be exempted persons under the Road Traffic Act
1961.
Irish Public Bodies Mutual Insurances Ltd (IPB
Insurances) insures some of the largest local authorities,
public and national government bodies for liability,
property and motor risks.
The SCA manages personal injury claims (both injuries
to employees and to members of the public), property
damage and clinical negligence claims brought against
certain State authorities. There are currently approximately
117 State authorities within the SCA’s remit. These
include, among others, all Government departments and
other specified State bodies/authorities, the Attorney
General, all Health Service Executive (HSE) facilities,
public hospitals and other agencies providing clinical
services and healthcare enterprises, An Garda Síochána,
the prison services, and community and comprehensive
schools.
Government departments and other State agencies,
whose claims are managed by the SCA, do not have
conventional insurance cover. Instead, these bodies
operate under State indemnity, i.e. a self-insurance model
whereby the State bears the financial risk associated
with the costs of claims.
D
C3
Captive insurance companies
These companies are usually formed by very large and
usually only insure the risks of that particular organisation.
Captives are formed for cost effective and tax efficient
purposes & may be managed in-house or by larger
brokers with international customers (e.g. AON and
Willis) who can provide captive management services.
Distribution channels
Distribution channels are the means through which
insurers sell their products and services to insurance
buyers. There are two main types – insurance purchased
directly from the insurer and insurance purchased via an
insurance intermediary (an insurance broker).
Direct insurance involves the seller (insurer) dealing
directly with the buyer (customer) via call centres, online
and branch / sale office networks.
2
An insurance intermediary (intermediary) brings
together buyers and sellers of insurance.
The Central Bank has defined the scope of the role of the
different types of intermediaries based on the number of
products on which they can give advice.
D1
Other distribution channels
•
Building societies and banks (or ‘bancassurance’) promote products such as private medical insurance, life insurance, serious illness cover, pensions policies, savings plans and household insurance.
•
An Post offers a range of insurance products underwritten by an insurer but marketed to its customers as an An Post product (white labelling).
•
General insurers develop health plans through a registered private health insurer and promote products to their existing customer base.
•
Tour operators and travel agents.
•
Retailers selling life insurance and other insurance products e.g. Tesco.
•
Price comparison websites.
F
The private health insurance market
•
•
•
the high cost of medical treatment
a perceived lack of access to public health services
the perceived standard of public health services.
The main reasons for taking out private health insurance
are:
Customers without private health insurance tend to be
medical card holders (i.e. were entitled to free public
healthcare services).
F1
Private health insurers
F1a
Other providers of health insurance
F2
Employee benefit consultants
Today there are five open membership undertakings
operating in the market – Aviva Health, GloHealth, Laya
healthcare (owned by AIG), VHI Healthcare and the
Hospital Saturday Fund (HSF) Health Plan Ltd. HSF Health
Plan Ltd operates differently from the other commercial
private health insurers as it does not offer comprehensive
in-patient plans.
EReinsurers
Reinsurance is a form of insurance for insurance
companies. It is the transfer to a reinsurer of all or part of
a risk underwritten by an insurer.
The main types of reinsurer are:
•
•
•
specialist reinsurers that do not sell insurance (only reinsurance)
Lloyd’s syndicates
insurance companies that also act as reinsurers.
Reinsurance brokers have specialist knowledge & their
primary role is:
•
•
•
Restricted membership undertakings are schemes
where membership is restricted to employees (and their
dependants) of particular organisations. There are seven
of these schemes in Ireland, e.g. the ESB Staff Medical
Provident Fund. Although such schemes are subject to their
own particular terms and conditions, they are regulated
under the Health Insurance Acts 1994–2014.
Employee benefit consultants normally work on a
fee-for-service basis with large businesses that arrange
health insurance for their employees as a fully or partially
subsidised benefit.
securing business from insurers
placing business with reinsurers
servicing and maintaining the business.
3
G
Industry and professional bodies
G1
Insurance Ireland
Industry bodies represent the interests of their members,
who work in a particular industry or sector. The role of
professional bodies normally includes education and
maintaining professional standards & these bodies do not
have a regulatory function.
Insurance Ireland is the largest of the industry bodies
in the insurance sector in Ireland. It has domestic and
international member insurance companies (both life and
non-life).
Collectively, Insurance Ireland members insure over 95%
of all life and non-life insurance business in Ireland. Each
year this business (domestic and overseas) generates
€25 billion in premium income and contributes €1.6 billion
in tax to the Irish exchequer.
As the industry body for insurance companies in Ireland,
Insurance Ireland has no statutory powers of regulation.
Rather its role, as the voice of insurance companies
in Ireland, is to represent and advocate on behalf of its
members to Government, state agencies, regulatory
bodies, public representatives, other national interest
groups, the media and the general public.
Insurance Ireland also represents its members on a
European and global level and keeps them up-to-date on
relevant policy and regulatory developments. It provides a
forum for member debate and policy formulation on such
issues.
The specific roles undertaken by Insurance Ireland are:
•
•
InsuranceLink – This is a shared database established by Insurance Ireland to assist in the detection and defence of exaggerated injury claims, which may result in prosecutions for fraud.
Insurance Information Service (IIS) – a free service to the public, which aims to help those who want independent information about insurance, or need help in resolving a problem with their insurance company.
•
Declined Cases Agreement (DCA) – Insurance Ireland administers the Declined Cases Agreement (DCA) and assists those who are finding it difficult to obtain insurance quotes for compulsory third party motor insurance.
•
Annual Factfile – provides detailed statistical analysis of the country’s insurance sectors. This provides a breakdown of premiums and claims, identifying trends and market share information to member companies.
•
Insurance Confidential – this helpline facility is designed to encourage whistle-blowing on those suspected of cheating the insurance system in any way.
Insurance fraud costs insurance companies in Ireland
an estimated 0200 million annually. Insurance Ireland is
committed to reducing overall claims costs to its member
companies and its activities in relation to fraud prevention
and detection play an important role in this regard. Since
its establishment in 2003, over 7,500 cases of suspected
fraud have been reported to Insurance Confidential.
G2
Motor Insurers’ Bureau of Ireland
The Motor Insurers’ Bureau of Ireland (MIBI)
operates a scheme to pay compensation to victims involved
in accidents with uninsured vehicles or unidentified drivers.
All motor insurers must, by law, be a member of the MIBI.
•
Uninsured vehicles – If the vehicle is not insured and its driver is liable for an accident, compensation will be paid to the claimant. There’s no limit on the monetary amount paid out for personal injury, whilst vehicle and property damage claims are subject to a limit of €1.12 million per claim. An excess (deductible) applies to the property damage element of the claim.
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•
Untraced or unidentified drivers (vehicles) – If the driver is untraced or unidentified, the MIBI will compensate the claimant for personal injury. The MIBI is not liable to pay for vehicle or property damage claims unless there are significant personal injuries arising from the same accident (i.e. an in-patient hospital stay for 5 days or more). In these circumstances, an excess of €500 applies to the vehicle or property damage element of the claim.
G3
Other trade and professional bodies
Other industry and professional bodies include:
Organisation
Membership and
function
The Insurance Institute of The professional
Ireland (III)
standards, training and
educational body for the
general insurance industry
in Ireland.
Life Insurance Association An educational and
(LIA)
professional body for
people working in the
financial services industry.
Organisation
Membership and
function
Insurance Europe
A European federation of
national insurance industry
associations (such
as Insurance Ireland),
providing a forum at EU
level for its 34 member
associations.
Bureau International des
Producteurs d’Assurances
et
de
Reassurances
(BIPAR
–
European
Federation of Insurance
Intermediaries)
A European federation
for national insurance
intermediaries
associations (such as the
IBA), providing a forum
at EU level for its 52
member organisations
from 32 countries.
Global Federation of
Insurance Associations
A global federation of
national insurance industry
associations (such
as Insurance Ireland),
providing a forum at a
global level for its 39
member associations.
Irish Brokers Association An industry body
(IBA)
representing insurance
brokers in Ireland and a
member of BIPAR (see
below).
Professional Insurance
Brokers Association
(PIBA)
An industry body
representing insurance
brokers in Ireland.
Association of Compliance A professional body
Officers in Ireland (ACOI) of compliance officers
and those employed by
regulatory bodies.
Dublin International
Insurance & Management
Association (DIMA)
An industry body
representing international
insurance, reinsurance
and captive companies
at national and European
level.
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